Market Insider/Tuesday Look Ahead

There's plenty of hand wringing around first-quarter earnings and Alcoa didn't help by kicking off the reporting season with a miss.

But it's the minutes from the Fed's last meeting that are expected to be the big interest in Tuesday's session as the rush of earnings reports has not yet begun. Traders hope to sift through those minutes for clues on the Fed's thinking as its next meeting approaches April 30. Other items worth watching are the NFIB small business survey, released at 7:30 a.m. and pending home sales, released at 10 a.m.

Morgan Stanley holds its annual meeting Tuesday, which should attract investor interest in part because it is the first Wall Street firm to hold a meeting. The Financial Times reports that CEO John Mack is expected to overcome opposition from some big shareholders and win reelection to the board by a wide majority.

In an effort to jolt lackluster sales, Starbucks Tuesday is introducing a new coffee blend with some fan fare.

Stocks in the News

Earnings are top of mind as Alcoa launched the earnings reporting season with a thud. After-the-bell Monday, the aluminum company said profits were half of last year's level because of higher energy and raw material costs. Alcoa earned $303 million, or 37 cents per share, below analysts expectations. Revenues slipped to $7.4 billion from $7.9 billion a year earlier. Alcoa expects aluminum demand to be up 8.5% in 2008.

Also in the news, Advanced Micro Devices after the bell said it would cut 1,650 jobs by the end of third quarter and said its revenues would be about 15 percent below the previous quarter because of lower than expected sales.

Oil Pressure

Oil popped nearly 3 percent on Monday to $109.09 a barrel. OPEC said it would not increase production as the summer driving season starts. On Tuesday, the Energy Information Administration is expected to release its official summer gasoline forecast at 8:30 a.m.. The EIA has said high prices should result in the first drop in summer consumption since 1991. It has also said it expects to see $4 per gallon gasoline in some markets but the national average should stay below that level.

Hot Commodities

Wilbur Ross, the bottom-fishing billionaire as CNBC's Larry Kudlow calls him, was in CNBC's studio before his appearance on Kudlow & Co. So, I asked Ross, a well-known investor in steel, what he thought about the runup in steel stocks Monday and the outlook for steel.

He started with a discussion of the sharp increase in coking coal prices that hit Nippon Steel shares overnight. But he said steel is one industry where costs can, and will, be pushed along. So for steel companies, "it's logical some people would make some improvements in the earnings estimates. On Wednesday, Morgan Stanley raised its 2008 steel price forecast for hot rolled coil, raising it to $743 a short ton, above consensus and also 21 percent above last year's level.

Morgan says U.S. producers are in an improved cost position. Morgan upgraded U.S. Steel to overweight from equal weight and bumped the target to $162 from $117. Morgan also initiated Steel Dynamics at overweight but downgraded Nucor to equal weight from overweight.

UBS also spoke about higher steel prices, saying its survey indicates metal prices are rising into the second quarter despite lackluster demand. It said benchmark sheet could rise to $1,000 a ton from $550 in 2007. yikes. The firm also raised its target on U.S. Steel to $160.

Ross related a story about a friend of his who had planned a construction project requiring $1 billion in steel over the next two years, but he's having trouble finding a seller who will guarantee him a price for the project.

"Here we are and it seems like a recession and there's not an oversupply of steel and there's not an oversupply of metals," said Ross, who as you might guess is bullish on metals as he believes global demand will continue to push prices higher.

Debating The Bottom

The debate rages on. Did the market hit bottom, and will it retest the lows?

We heard it on "Squawk on the Street" Monday when Alan Lancz said he thinks the market has bottomed. "It seems like there's a lot of cash on the sidelines waiting for a place to go. We were waiting for another shoe to drop, and we had that in mid March with the madness of Bear Stearns," said Lancz, president of Alan B. Lancz and Associates.

But Art Cashin, director of floor operations at UBS, warns that he thinks that bottom is just an intermediate bottom resulting from the credit crunch, and another test of lows could come later as the market responds to the recession.

And when you ponder your view of the recession (or downturn), you might want to keep the following comments in mind.

Martin Feldstein, president of the National Bureau of Economic Research, told "Squawk Box" Monday he believes the economy has been sliding into recession since January. Feldstein says that's his personal view, not the view of the NBER, the organization that officially calls recessions.

Feldstein says he also thinks the recession could go on longer, possibly twice as long as the last two recessions, which were about eight months peak to trough. The prior two recessions were each 16 months long, but it is too soon to tell the duration, he said.

Market Mayhem

The Dow was up 3, erasing a more than 120 point gain, to finish at 12,612 after Arch Coal made disappointing earnings comments. The Nasdaq was up 6 to 2364 and S&P was up 2 to 1372. The dollar was slightly higher against the euro, rising 0.16 percent to $1.5706 per euro. Gold meanwhile rose $13.70 per troy ounce, or 1.5 percent to $922.70.

Small Caps

I recently spoke to Citigroup's Lori Calvasina who is the small/mid cap strategist for Citigroup. Small caps are typically last to the party when the market moves higher so it was interesting to hear Calvasina's view on whether the market has established a bottom.

"I'm reluctant to call a bottom here," she said. She says there's five factors that signal small cap underperformance vs larger caps. Those trends are pretty much in place right now. They are:

slowing overall corporate profits

rising volatility

widening high yield credit spreads

tightening loan standards

rising consumer loan delinquencies

"I haven't seen the triggers yet that would make me change the call," she said. But there are some stocks she likes, and interestingly she told me that some smaller cap companies are as upbeat as some bigger companies about the lift international sales are giving the bottom line, thanks to the weak dollar.

Calvasina said one area she likes in the small/mid cap universe is health care. "Health care is one of the very few areas I can find that outperforms," she said. "They tend to perform well whether you're early in a recession or late in a recession."

She said she is market weight on techs. "One of the reason I have the market weight on tech is I like the valuations," she said. "I think it's going to be a place you want to be later on."